The ALLL decreased $1.7 million to $12.5 million at December 31, 2012 compared to $14.2 million at September 30, 2012, primarily as a result of net charge-offs of $982,000 during the third quarter. The ALLL represented 55.1% of nonperforming loans and 1.9% of total loans at December 31, 2012 compared to 60.1% and 2.1%, respectively, at September 30, 2012.

The following table presents a breakdown of our nonperforming assets:
        Three Month One Year
  December 31, September 30, December 31, Increase/ Increase/
  2012 2012 2011 (Decrease) (Decrease)
  (Dollars in thousands)
Nonperforming loans:          
One-to-four family residential  $ 6,248  $ 8,447  $ 9,808  $ (2,199)  $ (3,560)
Multifamily  4,711  4,711  949  --  3,762
Commercial real estate  6,274  2,287  3,736  3,987  2,538
Construction/land development  4,767  7,997  9,199  (3,230)  (4,432)
Consumer  759  141  --  618  759
Total nonperforming loans  22,759  23,583  23,692  (824)  (933)
           
OREO  17,347  19,209  26,044  (1,862)  (8,697)
           
Total nonperforming assets (1)  $ 40,106  $ 42,792  $ 49,736  $ (2,686)  $ (9,630)
           
Nonperforming assets as a percent of total assets 4.25% 4.40% 4.69%    
           
(1) The difference between the $40.1 million of nonperforming assets at December 31, 2012, reported above, and the amount reported by certain analysts as our nonperforming assets is due to the analysts' inclusion of all TDRs as nonperforming loans, although 93.6% of our TDRs are performing in accordance with their restructured terms. The remaining 6.4% of TDRs that are nonperforming at December 31, 2012 are reported above as nonperforming loans.
           

The following table presents a breakdown of our OREO by county and property type at December 31, 2012:
  County      
  King  Pierce  Kitsap  All Other  Total Number of Properties Percent of Total OREO
   (Dollars in thousands) 
OREO:              
One-to-four family residential  $ 2,349  $ 1,183  $ 410  $ 375  $ 4,317 21  24.9%
Commercial real estate (1)  1,569  6,993  1,136  724  10,422 21  60.1
Construction/land development  --  1,345  654  609  2,608 7  15.0
               
Total OREO  $ 3,918  $ 9,521  $ 2,200  $ 1,708  $ 17,347 49  100.0%
               
(1) Of the 21 properties classified as commercial real estate, nine are office/retail buildings, three are mixed-use buildings, five are developed lots and four are undeveloped lots.

OREO decreased $1.9 million, or 9.7%, to $17.3 million at December 31, 2012, from $19.2 million at September 30, 2012, as sales and write-downs of OREO exceeded transfers of loans into OREO during the quarter. We sold $4.1 million of OREO during the fourth quarter of 2012, generating net gains of $180,000. We evaluate our OREO inventory quarterly. As a result of this evaluation, we expensed $344,000 related to the decline in the market values of OREO properties in our portfolio during the quarter, as compared to $1.2 million for the third quarter of 2012. Additional expenses of $343,000 related to OREO were incurred during the quarter ended December 31, 2012. We continue to actively market our OREO properties in an effort to minimize the amount of holding costs incurred.

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